Is the Recession Over?

I’m rather astounded at all the ill-informed commentary I have read today in normally responsible places such as the Financial Times to the effect that the National Bureau of Economic Research is not sure that the recession is over. That is not at all the case. I am 100% certain that every member of the Business Cycle Dating Committee knows perfectly well that the recession ended some time ago. What the committee is unsure about is precisely when the recession ended. This is clear from the committee’s statement:

CAMBRIDGE, April 12 — The Business Cycle Dating Committee of the National Bureau of Economic Research met at the organization’s headquarters in Cambridge, Massachusetts, on April 8, 2010. The committee reviewed the most recent data for all indicators relevant to the determination of a possible date of the trough in economic activity marking the end of the recession that began in December 2007. The trough date would identify the end of contraction and the beginning of expansion. Although most indicators have turned up, the committee decided that the determination of the trough date on the basis of current data would be premature. Many indicators are quite preliminary at this time and will be revised in coming months. The committee acts only on the basis of actual indicators and does not rely on forecasts in making its determination of the dates of peaks and troughs in economic activity. The committee did review data relating to the date of the peak, previously determined to have occurred in December 2007, marking the onset of the recent recession. The committee reaffirmed that peak date.

It may seem trivial, but whether the recession ended in the 2nd quarter or the 3rd quarter of last year is important for business cycle analysis. The committee’s problem is that many key indicators of economic activity, such as real GDP, are revised so often and to such a large extent that economic history is continually being rewritten. Since, from the NBER’s point of view, being right is more important than being fast there’s no reason not to wait until it is comfortable that it has all of the data that it needs to render a decision and that such data won’t be revised significantly.

One final point worth remembering is that the NBER is entrusted to call the dates of business cycles precisely because there are political implications to it. That’s why the Bureau of Economic Analysis doesn’t determine when a recession has begun or ended. But of course private economists–or even the Council of Economic Advisers–are perfectly free to express an opinion on the subject. My own guess is that the recession formally ended in June 2009. But if it turns out that it was actually in July 2009 I won’t be upset.

Bruce Bartlett is a columnist for Forbes.com, the online side of Forbes, the nation’s premier financial magazine.

He served for many years in prominent governmental positions including executive director of the Joint Economic Committee of Congress, Deputy Assistant Secretary for economic policy at the U.S. Treasury Department during the George H.W. Bush Administration, and as a senior policy analyst in the White House for Ronald Reagan.

Bruce is the author of seven books, including the New York Times best-selling Impostor: How George W. Bankrupted America and Betrayed the Reagan Legacy, and thousands of articles in national publications including the Wall Street Journal, New York Times, Washington Post, New Republic, Fortune and many others. He appears frequently on CNN, CNBC, C-SPAN and Fox News, and has been a guest on both the Daily Show with Jon Stewart and the Colbert Report.